Differences between ROAS and ROI

Differences between ROAS and ROI

4 months ago

Differences between ROAS and ROI

The abbreviation ROAS stands for Return on Advertising Spend. It determines the ratio of ad spend to revenue from a particular campaign. The abbreviation ROI stands for Return on Investment. ROI is often used to evaluate the overall performance of a particular investment or business. 

We can show the difference between ROAS and ROI with a table as follows. 

Criteria ROAS (Return on Ad Spend)  ROI (Return on Investment) 
Definition Measures return on advertising spend.  Measures return on investment. 
Formula ROAS = Total Revenue / Advertising Spend  ROI = (Total Revenue - Investment Cost) / Investment Cost) 
Measuring Unit  Ratio (% or a numeric value)  Ratio (% or a numeric value) 
Area of Use  It is often used to measure the effectiveness of marketing activities.  It can be used to measure the performance of all investments. 
Example 

company spent $1000 on an advertising campaign and earned $5000 in revenue from that campaign. 

To calculate ROAS: 

ROAS = 5000 / 1000 = 5. That is, for every $1 of advertising spend, $5 was generated. 

company invested $100,000 in a business project. The project brought in $150,000 in revenue in 1 year. 

To calculate ROI: 

ROI = (150,000 - 100,000) / 100,000 = 0.5. So, 50% of the investment was recovered. 

 

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